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Audited results for the year ended 30 June 2014
Accéntuate Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 2004/029691/06)
Share Code: ACE
ISIN Code: ZAE000115986
(“Accéntuate” or “the group”)
Audited results for the
year ended 30 June 2014
Audited Summarised Consolidated Financial Statements
for the year ended 30 June 2014
Audited summarised consolidated statement of comprehensive income
for the year ended 30 June 2014
Audited Audited
30 June 30 June
2014 2013
R‘000 R‘000
Revenue 308 101 284 213
Cost of sales (147 297) (135 219)
Gross profit 160 804 148 994
Other income 1 876 431
Other operating expenses (153 131) (134 298)
Operating profit 9 549 15 127
Finance costs (2 101) (1 909)
Profit before tax 7 448 13 218
Taxation (2 308) (3 991)
Share of loss from associate - (400)
Profit for the year 5 140 8 827
Other comprehensive income for the year:
Revaluation reserve transferred to accumulated loss 1 746 1 106
Total comprehensive income attributable to owners of
the parent 6 886 9 933
Earnings per share (cents) 4,48 8,38
Diluted earnings per share (cents) 4,46 8,38
Notes to the statement of comprehensive
income:
Headline earnings per share (cents) 4,46 8,41
Diluted headline earnings per share (cents) 4,45 8,41
Number of shares:
- Weighted average number of shares 114 635 975 105 335 517
- Diluted weighted average number of shares 115 111 585 105 335 517
Reconciliation of headline earnings:
Profit for the year attributable to ordinary
shareholders 5 140 8 827
(Profit)/loss on disposal of property, plant and
equipment net of taxation (22) 27
Headline earnings for the year attributable to
ordinary shareholders 5 118 8 854
Audited summarised consolidated statement of financial position
as at 30 June 2014
Audited Audited
30 June 30 June
2014 2013
R‘000 R‘000
ASSETS
Non-current assets 94 249 86 119
Property plant and equipment 52 576 45 302
Goodwill 36 963 34 928
Intangible assets 1 864 531
Other financial assets - 2 041
Deferred taxation 2 846 3 317
Current assets 147 043 101 268
Inventories 76 018 51 965
Trade and other receivables 54 086 41 192
Other financial assets 7 175 4 953
Taxation receivables 2 173 2 770
Cash and bank 7 591 388
Total assets 241 292 187 387
EQUITY AND LIABILITIES
Capital and reserves 152 379 134 550
Share capital 136 710 126 382
Reserves 22 830 22 215
Accumulated loss (7 161) (14 047)
Total equity 152 379 134 550
Non-current liabilities 9 389 4 791
Deferred taxation 9 389 4 791
Current liabilities 79 524 48 046
Other financial liabilities 390 2 850
Trade and other payables 45 612 32 284
Operating lease liability 2 559 2 139
Current tax payables 758 1 333
Bank overdraft 30 205 9 440
Total liabilities 88 913 52 837
Total equity and liabilities 241 292 187 387
Number of shares in issue 123 704 022 111 108 119
Net asset value per share (cents) 123 121
Tangible net asset value per share (cents) 92 89
Audited summarised consolidated statement of changes in equity
Audited Audited
30 June 30 June
2014 2013
R’000 R’000
Capital and reserves - opening balance 134 550 125 236
Profit for the year 5 140 8 827
Deferred tax on revaluation - 182
Share options excercised - 305
Shares issued for acquisition of assets 10 328 -
Net effect on the revaluation of property 2 324 -
Share-based payment expense 37 -
Capital and reserves - closing balance 152 379 134 550
Audited summarised consolidated statement of cash flows
Audited Audited
30 June 30 June
2014 2013
R‘000 R’000
Net cash from operating activities (6 627) 1 580
Net cash used in investing activities (4 085) (2 741)
Net cash used in financing activities (2 850) (5 395)
Net decrease in cash and cash equivalents (13 562) (6 556)
Cash and cash equivalents at beginning of
the year (9 052) (2 496)
Cash and cash equivalents at end of the year (22 614) (9 052)
Segment report
For the year ended
30 June 2014
Audited Audited Audited Audited Audited
30 June 30 June 30 June 30 June 30 June
2014 2014 2014 2014 2014
R‘000 R‘000 R‘000 R‘000 R‘000
Environmental Water Corporate and
Flooring Solutions Treatment Eliminations Group
Total sales 238 956 75 519 -
Less: inter-segmental sales (6 374)
Revenue 238 956 75 519 (6 374) 308 101
Gross profit 117 645 43 159 - 160 804
Operating profit 6 605 697 2 247 9 549
Finance costs (124) (1 096) (881) (2 101)
Profit /(loss) before tax 6 481 (399) 1 366 7 448
Share of loss from associate 0 0
Other information
Capital expenditure 3 819 2 617 74 6 510
Depreciation and amortisation (3 964) (2 489) (71) (6 524)
Segment assets 175 076 32 413 33 803 241 292
Segment liabilities 46 056 22 919 19 941 88 916
Segment report
For the year ended
30 June 2013
Audited Audited Audited Audited Audited
30 June 30 June 30 June 30 June 30 June
2013 2013 2014 2014 2014
R‘000 R‘000 R‘000 R‘000 R‘000
Environmental Water Corporate and
Flooring Solutions Treatment Eliminations Group
Total sales 223 830 66 574 286
Less: inter-segmental sales - (6 477)
223 830 66 574 (6 191) 284 213
Revenue
Gross profit 107 736 40 972 286 148 994
Operating profit 12 340 705 2 082 15 127
Finance costs (156) (1 149) (604) (1 909)
Profit /(loss) before tax 12 184 (444) 1 478 13 218
Share of loss from associate (400) (400)
Other information
Capital expenditure 2 515 1 118 225 3 858
Depreciation and amortisation (2 286) (1 028) (237) (3 551)
Segment assets 140 418 24 432 22 537 187 387
Segment liabilities 23 833 17 706 11 299 52 838
REVIEW OF PERFORMANCE
INTRODUCTION
Following the exciting developments at the time of completing the previous financial year, including the FloorworX
60th anniversary promotions and the acquisitions of Suntups and Degrachem, it would have been virtually impossible
at that time to have foreseen how difficult the coming financial year would be for the Accéntuate group. The
economic cycles for the manufacturing and construction industries have continued to deteriorate beyond initial
expectations. Coupled with the prolonged industrial action that has crippled a number of sectors supplied by the
group and the severe upward price pressure on many raw materials and fuel prices as well as already depressed
government infrastructure spend, these factors combined have contributed to making the 2013/14 financial year incredibly
challenging.
Overall revenue for the year increased by 8,4% to R308 million (2013: R284 million) and gross profit increased by 8%
to R160,8 million. There were significant increases in operating expenses which were impacted by a number of factors:-
the inclusion of R6,0 million from the acquisitions, R2,5 million from higher fuel prices, significant increases in other
administered prices, and the impact of the weaker rand, off-set by employment costs being 6% lower than the previous
year. The result was operating profit reduced to R9,5 million.
Finance costs were higher due to the increased level of borrowings and income tax charges were lower in line with the
reduced profits. The profit for the year of R5,1 million was 42% lower than last year and headline earnings per share of
4,46 cents were 47% lower following the issuing of shares for the acquisitions.
In the commentary for the interim results we noted that “operating entities within Accentuate are anticipating that
the trading levels for the second half of the current financial year will be better than those experienced in the second
half of the previous financial year”. This comment was based on some improvement seen in January and February.
Unfortunately this trend reversed noticeably during the last four months of the financial year, resulting from the lower level
of government related orders, the widespread industrial action and the generally lower activity in the manufacturing and
mining sectors.
Inventories at year end were significantly higher than the previous year due to a number of factors. R9,0 million was
attributable to the Suntups and Degrachem acquisitions, R5,5 million was attributable to the introduction of new product
ranges - including the launch of a carpet tile range for the corporate market - and R7,3 million was attributable to
the build-up of the finished goods produced at the FloorworX East London factory during May and June in anticipation of
the Numsa strike which commenced early in July. Trade and other receivables increased as a result of substantial
prepayments for imports only received after year-end. The net of trade and other receivables less trade and other payables was
virtually unchanged from the previous year, and both trade receivables and trade payables were well controlled and in
line with targeted parameters. Capital expenditure excluding acquisitions was less than budgeted and slightly higher than
the previous year. The result was net borrowings increased by R13,6 million. The inventory levels and borrowings have
both declined significantly between the year-end and the release of this report.
FLOORING DIVISION
The FloorworX business operations contributed 76% of the group revenue.
The lackluster trading conditions experienced during the first half continued throughout the year and were, as
anticipated, further impacted in the second half by the national elections. Price and margin pressures and increased
competition were evidenced in the market. Revenue was 6,7% higher following the inclusion of the Suntups acquisition for ten
months - excluding this acquisition revenue was flat. Despite the reduced volume throughput on the tile line caused by weak
demand from government projects - in particular school classrooms, the higher input costs related to petrochemical
derivatives, as well as the depressed state of the local construction environment, FloorworX increased revenue by 6,7% and
managed to record a slight improvement in the gross margin ratio for the year.
However, substantial increases in operating costs largely beyond management’s control resulted in operating profit
being under severe pressure and the division achieved an operating profit of R6,6 million compared to R12,3 million for the
previous year. Profitability was severely impacted by the weakening of the rand and higher oil prices, which resulted
in large increases in the price of diesel and consequently dramatically higher delivery costs. There were also
significant increases in other administered prices such as electricity and water. The nature of the markets in which the business
operates sees prices generally fixed a considerable time before delivery actually takes place which makes it very
difficult to recover these increases in the short term.
Inventories were intentionally increased during May and June in anticipation of the Numsa strike in July, and were
further impacted by the Suntups acquisition and the introduction of new ranges including the entry into carpet solutions
for commercial applications. The project pipeline remains active and FloorworX is cautiously optimistic that government
will increase its spend in the areas of both healthcare and education, which should have a positive impact on the business
going forward. The continuity following the election in the departments of Health, Education and Public Works and the
formation of the Presidential Infrastructure Coordinating Commission are positive signs for future growth in this area.
ENVIRONMENTAL SOLUTIONS DIVISION
This comprises the SAFIC business operations and contributed 24% of the group revenue.
SAFIC continued to face a number of challenges including a further slowdown in the manufacturing and mining sectors -
compounded by significant industrial action - which have traditionally been the major markets serviced by this
division, the volatility and relative weakness of the rand and the impact of administered cost increases. The division has taken
strong action in terms of further reducing costs and continues to increase penetration in the commercial cleaning
market. The growth experienced in this commercial sector has, to a large extent, off-set the impact of reduced trading in the
mining and manufacturing areas of its business and ensured a firm foundation for the further implementation of their
chosen strategy.
SAFIC achieved a 13,4% increase in revenue over the corresponding year. The gross profit margin was reduced as result
of intense pricing pressure from both customers and competitors and increases in raw material inputs. A concerted focus
saw cash operating costs being well contained which allowed the operating profit to be in line with the previous year. Although
it has not achieved the required level of profitability, management is happy with the progress made to date and remains
confident that the coming financial year will see SAFIC making a meaningful contribution to the profitability of the group.
The business is concentrating on greater specialisation, the positioning of the Cleanfix and SRI ranges of cleaning
products, additional metal treatment opportunities, the distribution of the Ion Exchange range of water treatment products
together with further exploitation of the synergies with FloorworX in the areas of adhesives and enhanced maintenance
products. These are coupled to an even greater focus on the sales and marketing areas of the business and a drive on
building strong relationships with identified customers.
WATER TREATMENT DIVISION
This comprises the Ion Exchange Safic water treatment business, which is a partnership between Accentuate, Safic and
Ion Exchange India that is equity accounted by the group as an associated company.
During the year, Ion Exchange SAFIC actively pursued both acquisitive growth as well as building capacity for delivery
of the anticipated volume business. Structures to accommodate fast tracking the entry of the Ion Exchange technologies
into the Southern African market have been implemented. An effective management team has been appointment to ensure the
profitable growth of this division.
The division has secured a number of projects, including the supply of a drinking-water plant and water-recycling
plant, the supply of speciality chemicals for enhanced performance of gold extraction, a number of clients in the food and
beverage sector, and water treatment chemicals for water utilities.
PROSPECTS
Although Accéntuate is facing a number of serious macroeconomic challenges, management remains confident that these
are largely temporary in nature and that the group will in the near future be achieving and exceeding the levels of
profitability previously achieved.
ACQUISITIONS DURING THE YEAR
On 1 September 2013 the group acquired certain of the assets and liabilities of Degrachem (Pty) Ltd and Suntups Wooden
Flooring (Pty) Ltd in separate transactions. The Degrachem business acquired is principally involved in the supply of
specialty metal treatment products and the Suntups business acquired is principally involved in the supply of engineered
wooden flooring and decking products.
Recognised Fair Values on Acquisition
Degrachem Suntups Total
R’000 R’000 R’000
Property, plant and equipment 667 314 981
Trade and other receivables 785 243 1 028
Inventory 303 6 284 6 587
Trade and other payables (656) (336) (992)
Net identifiable assets and liabilities 1 099 6 505 7 604
Goodwill on acquisitions 735 1 300 2 035
Intangible assets 1 500 - 1 500
Deferred tax (420) - (420)
Total consideration 2 914 7 805 10 719
Consideration settled by issue of shares 2 524 7 805 10 329
Contingent consideration (to be settled in shares) 390 - 390
Total consideration 2 914 7 805 10 719
In the ten months to 30 June 2014, Suntups and Degrachem contributed revenue of R20,8 million and operating profit of
R1,46 million to the group’s results. If the acquisitions had occurred on 1 July 2013, management estimates that Suntups
and Degrachem would have contributed R25 million revenue and R1,75 million operating profit to the group.
Goodwill and intangible assets from the acquisitions consist largely of the synergies and economies of scale expected
from combining the operations of the entities into existing structures, some complex and unique formulations, know-how
and market knowledge of management, a well-established customer base, and certain agency and distribution agreements.
The year under review has seen both the Suntups and Degrachem acquisitions successfully bedded down and the group is
now concentrating on extracting synergies and reducing costs, especially with regards to the integration of Suntups which
has recently relocated onto the group site at Steeledale.
The process of identifying further suitable potential acquisitions continues.
DIVIDEND
The Accéntuate board deems it prudent not to declare a dividend.
GOING CONCERN
The board of directors is satisfied that, after taking into account the current banking facilities, its utilisation
thereof and the budgeted profits and cash flows, the working capital available to the group will be sufficient to meet its
requirements for the next 12 months.
CONTINGENT LIABILITY
There are non-executive directors’ fees of R1,8 million payable subject to approval of the required special resolutions.
UPDATE ON ANNUAL GENERAL MEETING
The legal challenge against the results of certain of the resolutions passed at the latest Accéntuate annual general
meeting instituted by a consortium of shareholders, whose votes were amongst those excluded from the voting results due to
non-compliance with the Companies Act, is continuing. The company is doing everything possible to have the matter heard in
court as quickly as possible.
A further announcement will be made to shareholders immediately after the outcome of the legal proceedings has been
decided.
CHANGES TO THE BOARD OF DIRECTORS
Ms Dineo Molefe resigned as non-executive director and chairperson of the audit and risk committee with effect from 1
July 2014.The board wishes to thank Ms Molefe for the valuable contributions made during her tenure. At the same time
Mr. Pieter Slabbert Kriel, who acted as Ms Molefe’s alternate director, was appointed as a non-executive director of
Accéntuate.
On 1 August 2014 Mr. Andile Mjamekwana was appointed as an alternate director to Pieter Kriel. Andile has a strong
investment banking and accounting background, which will see Andile contributing positively to the growth of Accéntuate,
particularly when it comes to the targeting and assessment of potential acquisitions. The board has appointed Andile as
chairman of the audit committee.
BASIS OF PREPARATION
The audited summarised consolidated financial statements are prepared in accordance with the requirements of the JSE
Listings Requirements for abridged reports, and the requirements of the Companies Act applicable to summary financial
statements. The Listings Requirements require abridged reports to be prepared in accordance with the framework concepts
and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and to also contain the information required by
IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial
statements, from which the summarised consolidated financial statements were derived, are in terms of International
Financial Reporting Standards and are consistent with the accounting policies applied in the preparation of the previous
consolidated annual financial statements except as disclosed in the changes in accounting policies note.
The audited summarised consolidated financial statements were prepared under the supervision of the chief financial
officer, Chris Povall CA(SA).
CHANGES IN ACCOUNTING POLICIES
The group adopted the new, revised or amended accounting pronouncements as issued by the IASB, which were effective
and applicable to the group from 1 July 2013, none of which had any material impact on the group’s financial results for
the year.
IFRS 10 Consolidated Financial Statements
The adoption of IFRS 10, which applies a revised definition of control, did not result in any material change in the
consolidation of the group.
IFRS 13: Fair value measurement
IFRS 13, which applies a revised definition of fair value, was adopted and applied prospectively and did not result in
any material impact on the financial results of the group.
UNQUALIFIED AUDIT OPINION
These summarised consolidated financial statements for the year ended 30 June 2014 have been audited by Mazars
(Gauteng) Inc., who expressed an unmodified opinion thereon. The auditor also expressed an unmodified opinion on the annual
financial statements from which these summarised consolidated financial statements were derived. A copy of the auditor’s
report on the summarised consolidated financial statements and of the auditor’s report on the annual consolidated
financial statements are available for inspection at the company’s registered office, together with the financial statements
identified in the respective auditor’s reports.
The auditor’s report does not necessarily report on all of the information contained in this announcement. Shareholders are
therefore advised that in order to obtain a full understanding of the nature of the auditor’s engagement they should obtain
a copy of the auditor’s report together with the accompanying financial information from the company.
APPRECIATION
The board would like to take this opportunity to thank the various management teams for their loyalty and dedication
towards the achievement of the objectives that have been set. The board would also like to thank all the customers,
partners, advisors, suppliers and most importantly, the shareholders for their ongoing support and faith.
29 September 2014
CORPORATE INFORMATION
Non executive directors:
MDC Motlatla (chairman)
RB Patmore
NE Ratshikhopha
PS Kriel
A Mjamekwana (alternate)
Executive directors:
FC Platt (Chief Executive Officer)
CJ Povall (Chief Financial Officer)
DE Platt
Registered address:
Accéntuate Business Park
32 Steele Street
Steeledale
2197
Postal address:
P.O. Box 1754
Alberton
1450
Company secretary:
PS Dayah
pdayah@accent.co.za
Telephone:
011 406 4100
Facsimile:
086 509 3246
Website:
www.accentuateltd.co.za
Email:
info@accent.co.za
Twitter:
@AccentuateLtd
Facebook:
www.facebook.com/AccentuateLtd
Transfer secretaries:
Computershare Investor Services (Pty) Limited
Designated adviser:
Bridge Capital Advisors (Pty) Limited
Attorneys:
Fullard Mayer Morrison
Investor relations:
Keyter Rech Investor Solutions
DISCLAIMER
This announcement may contain certain forward-looking statements concerning Accéntuate’s operations, business
strategy, financial conditions, growth plans and expectations. These statements include, without limitation, those concerning
the economic outlook, business climate and changes in the market. Such views involve both known and unknown risks,
assumptions, uncertainties and important factors that could materially influence the actual performance of the group. No
assurance can be given that these will prove to be correct and no representation or warranty, expressed or implied, is given
as to the accuracy or completeness of such views contained in this announcement.
www.accentuateltd.co.za
Date: 29/09/2014 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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